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Well-Paid Benefit Most As Economy Flourishes
Trend Is Pronounced In Washington Area

By Neil Irwin and Cecilia Kang
Washington Post Staff Writers
Monday, July 10, 2006; A01

Wages are rising more than twice as fast for highly paid workers in the Washington area as they are for low-paid workers, an analysis of federal data by The Washington Post shows.

That means the spoils of the region's economic expansion are going disproportionately to workers who are already well-paid, widening a gap between rich and poor in a place where it is already wider than in most of the country.

Businesspeople cite shifts in the world economy that give educated workers leverage to negotiate for higher wages but make low-paid workers replaceable -- a disparity that is especially pronounced in a service economy like Washington's.

The region's economy is strong and businesses are expanding, hiring more software engineers, financial analysts, salespeople and other skilled workers, thus bidding up their pay. But companies are simultaneously finding ways to automate clerical tasks, move call centers to cheaper places and handle business online, weakening demand for less-skilled workers.

Consider Focuspoint Inc., a company in Manassas that sells recorded messages for companies to play when callers are on hold. Three years ago, two order clerks frantically juggled calls and faxes from several hundred clients placing orders. Now the company has 1,700 clients and is expanding its sales and other high-level staff but still has just those two clerks -- who now sit quietly overseeing Internet orders.

"Three years ago, we would have had to hire more people to handle all our new clients," said Joe Martin, a vice president. "Now, we rely on new technology to pick up that work."

Such innovations help explain why, from 2003 to 2005, the average wage for people in the lowest pay bracket, with salaries around $20,000, rose only 5.4 percent in the Washington region -- not enough to keep up with rising prices. For the jobs that pay around $60,000, salaries rose 12.4 percent, well ahead of the 6.8 percent inflation in that period.

Those numbers come from a Post analysis of federal data collected from employers. The disparity exists throughout the nation, but the gap between high- and low-paid workers is widening faster in Washington than in the country as a whole.

"I'm not the kind of person to say I'm not getting paid enough," said Kamal Quarles, 27, of Oxon Hill, who handles packages for a large shipping company -- a function that is rapidly becoming automated. He said he is earning 4 percent more than he did when he started four years ago. "The reality is my pay isn't rising, but everything else is."

In the highest wage bracket, where chief executives, lawyers and other professionals earn six figures, average wages rose 8.5 percent from 2003 to 2005. The increase in their incomes is probably even higher, because employees at that level also often get better benefits, partnership income, stock options or other compensation.

Nationwide, the wage gap is widening more slowly: The average wage for upper-middle-income jobs rose 5.8 percent, and low-wage jobs saw pay increases of 3.4 percent, from 2003 to 2005.

These figures are based on data from a twice-yearly survey, overseen by the U.S. Labor Department, of 200,000 employers across the United States. For this analysis, The Post divided the 2.7 million jobs in this region into five brackets based on the jobs' average pay, comparing changes in each bracket over two years. (See accompanying story for details.)

The Post's analysis does not give a full picture of how income is distributed in the region, but it does offer a rough idea of how the benefits of the region's economic expansion are being distributed -- and confirms a view already held by many people involved in hiring.

When companies ask HireStrategy Inc., a staffing firm in Reston, to help them find an employee for a clerical job handling invoices, HireStrategy can usually find a match within a few days, chief executive Paul Villella said. The would-be clerk generally cannot negotiate a higher salary because the firm knows it can find someone else. In contrast, filling higher-level jobs in finance, health care or engineering might take weeks, and those candidates can negotiate for raises of 20 percent or more over their old jobs.

"This is a divided labor market," said Jonas Prising, president of Manpower North America, a large staffing firm. "There's no talent shortage for people with low skills or no skills, but you do have a talent shortage for people with specific skills."

In the 1990s boom, Prising said, there was a shortage of low-skilled as well as high-skilled talent, sending wages up across the board.

What changed? Many new technologies and ways of operating -- often aimed at cutting labor costs -- were in their infancy in the late 1990s. Now they are maturing, tamping demand for low-skilled workers.

Some examples: The retail industry has shifted to big stores that require fewer cashiers (two-year wage gain nationwide: 2.1 percent) and stock clerks (2.7 percent) than the department stores and small shops they replace. Firms that once employed dozens of people handling payrolls now hand the work to huge companies that do nothing else and rely heavily on automation (payroll clerk wages: up 4.7 percent). And long-distance telephone costs have dropped so much that it is feasible for big companies to hire people in the rural United States or abroad -- far from corporate offices -- to take phone orders (order clerk wages: up 3.2 percent).

The banking industry offers a particular window on the changes. Banks in the Washington region are booming, with $28 billion more in assets in 2005 than they had in 2003, a 27 percent increase, according to data from bank regulators.

"We're adding locations, our competitors are adding locations, you have new entrants in the marketplace," said William Couper, president of Bank of America in the Washington area. "There's a real competition for qualified talent." As a result, the average salary of financial managers in the region rose 15.8 percent between 2003 and 2005, to $102,440.

It's a different story at the teller's window.

More people are banking on the Internet, by telephone or at teller machines. So while banks had 88 tellers per $1 billion in bank assets in the region in 2003, two years later they had 84, based on a comparison of data from bank regulators and the Labor Department. And in those two years, tellers' average salary rose only 4.6 percent, to $24,090.

When demand for even a few types of low-wage jobs goes soft, wages can be held down in all of them, economists say. That's because a worker qualified to be a retail clerk might just as well become a security guard or receptionist. That means, in effect, that all low-wage workers are competing with one another, a sharp contrast with more specialized jobs.

For that reason, Shauna Thompson may be able to blame the global trends hurting bank tellers for the scant pay increase she's gotten as a home health aide.

The elderly population in the Washington area and nationwide is rising, as is the number of jobs caring for the elderly and disabled in their homes. Yet the average wage for such jobs in the region rose 3.9 percent from 2003 to 2005, while the average wage in many advanced medical specialties rose 20 percent or more.

"It's hard," said Thompson, 29, of Reston, whose average pay varies from $10 to $15 an hour depending on the client. That range has barely changed in her nine years on the job. She struggles to spend 20 minutes a day with her 3-year-old son between her two jobs and his sleep schedule.

"We'd love to pay our aides better, and Lord knows they deserve better wages," said D.J. Dabby, executive director of the company for which Thompson works, Medical Team Inc. But she has to satisfy insurers demanding low bills -- and even at the low wages, Dabby said, she can keep the business staffed.

Immigration may be another factor in the weak wage gains for those with low incomes. Recent immigrants, legal or not, tend to be less educated than the population at large and thus compete with low-skilled native-born Americans for jobs.

Studies vary, but some economists estimate that immigration reduces wages for native-born Americans without a high school education by as much as 8 percent.

"The least-skilled natives are hurt somewhat by immigrant competition," said Jared Bernstein, senior economist at the Economic Policy Institute, which researches issues affecting low-wage workers. "But then, in the 1990s, you had one of the fastest decades of immigrant inflow on record, and low-skill wages did just fine. It boils down to immigrant competition for low-paid workers is a whole lot tougher in an unfavorable job market."

Quarles, the shipping clerk frustrated by puny raises, isn't waiting for the economics to change. Foreseeing that package handling would grow only more automated, he enrolled in college. He just graduated and plans to look for a job with more promise.

"This," he said, "isn't a career for me."

Database editor Dan Keating contributed to this report.

© 2007 The Washington Post Company